Labour backs ‘radical’ pension reforms but demands more detail

Labour has backed the Chancellor's move to radically overhaul the pension system, which will give retirees freedom to do what they want with their money at age 55.

However, the BBC reports shadow work and pensions secretary Rachel Reeves demanded greater detail on the plans – which were described as the biggest pensions shake-up in a hundred years.

Pensions formed a massive part of George Osborne’s fifth Budget. The Chancellor said many current restrictions would first be relaxed and then scrapped to give savers more control.

Anyone aged over 55 who has saved into a defined contribution pension scheme will be able to take their full pot as a lump sum, subject to tax, to invest or spend as they like, the report said.

Reeves told BBC Radio 4’s Any Questions the current annuity market was not working well for people who “have saved all their lives”.

She said: “I support reform and I support what has been announced this week, although we need to see a lot more detail about what that will mean in practice.”

Labour wants the government consultation to investigate whether the move actually helps lower and middle income workers, whether people who still want to buy an annuity will be able to and greater detail on the advice for all pledge.

Reeves also continued the party’s call for wider reform on pension charges and providers’ fees.

She also said she believed most people would not choose to draw down their full pension, the report said.

Meanwhile, the secretary of state for work and pensions, Iain Duncan Smith said the Budget was “one of the greatest” ever delivered and would make sure people “who have actually tired hard will get rewarded”, the BBC reports.

He backed Osborne’s move to allow people to spend their pensions in their own way, rather than the majority being left with few options other than buying an annuity.

Duncan Smith told Sky News people would not blow their savings.

“What they will actually do is to go out and find some (investment) vehicle to give them better returns than their annuities,” he said.

Strong market remains

However, all is not lost for the annuity market, according to Liberal Democrat chief secretary to the Treasury Danny Alexander.

He told the BBC’s Andrew Marr said: “I think a lot of people will [still] want to buy annuities. There’s still a very strong market there… This will also help to make the annuity market more competitive.”